Where is the stimulus for the people that need a first chance? Why is it all focused on those that need their second chance? Whether it’s a company or an individual that’s financially distressed, there are many more that are not and just need a push in the right direction to ensure success.
Home
› Monthly Archives › February 2009
12Feb
US dollar index topping?
We may be seeing an interim top on the US dollar index, which is no doubt expected to see pressure from the stimulus plan and the Obama administration’s bank bailout 2.0 that is expected to be revealed in the weeks to come. The US dollar index appears to be making a descending series of highs. If the pattern continues this could signal the next wave down.
Watch the foreign exchange markets, as the US dollar could be bound for a correction soon. Possible trades include going long Canadian dollars, Australian dollars, Swiss francs, Gold, Silver and hedging by shorting the GBP Sterling.
12Feb
Bye bye Dubai
In the downdraft of oil prices and the global recession taking full grip, a once bustling city in the United Arab Emirates is collapsing at an alarming rate. Dubai’s foreign workers are leaving in droves, their investments are drying up and new problems seem to be arising on a daily basis.
Recent incidents have highlighted the deterioration of competence. Only a few weeks ago, raw sewage was discovered on tourist beaches. Apparently being pumped in to the ocean by poorly run industry. Just a few days ago a tanker collided with a freighter offshore creating a lot of debris and a necessitating more clean ups.
Above: The planned Dubai Towers project. On hold.
I remember only a few years ago I would read that record breaking skyscrapers were being planned and even erected on a seemingly never ending basis. Now that the local economy is collapsing the government has passed a law that forbids talking badly about the city and fines those that would dare to about $250,000.
Tourism has been dropping as other destinations or staycations (staying home on vacation) become more desirable. Certainly many of the lofty projects will be put on hold if not outright abandoned as income dries up in energy and tourism. Many speculate this may be the end of a city that never really reached its planned potential.
12Feb
S&P 500 hangs in the balance
Overnight the tone of futures markets has been pretty negative, pushing the major indexes to levels that could retest the trend line support at open if we stay this low. The S&P has been flirting with 820, a very key level that if significantly violated to the downside, 813 and 800 remain as important support levels. After 800, we have a vacuum that could reach the November lows. Of course a violation of 820 on the downside will be seen as a breakdown of the modest uptrend and that could catalyse a wave of selling.
One discouraging sign is since the small rally in early January, every time the S&P 500 has bumped the 50 day moving average we’ve seen a wave of selling. Market participants are not commiting to long term positions, but range / trend trading short term and this action is increasing volatility.
11Feb
The Treasury plan’s lack of detail disappoints
The US market had its worst day in 2009 on account of the Treasury’s lack of direction and specifics in their plan to assist ailing financial institutions. The Dow shrugged off 8000 and the S&P lost the key area of 850. The only encouraging signs are some end of day short covering in to the oversold condition that was created and that the S&P 500 is still hugging its uptrend line from the Nov ’08 lows. Other than that the picture looks quite bad. Geithner had been expected to reveal details and even figures, but instead the market received more rhetoric and promises.
10Feb
Gold to $1000?
The action in precious metals lately has been impressive. Silver and gold caught a bid amidst the chaos in currency markets and bank balance sheets. The nervousness has created an atmosphere of fleeing away from equity in to safer havens. With gold seemingly gaining steam to make another move to the upside, is $1000 within sight?
Looking ahead
Markets tend to discount the here and now and focus on the future. Has gold already priced in potential inflation or is that a variable being gauged on a daily basis? Options traders in GLD would suggest that $95 to $100 (or around 950-1000/oz) are reasonable price targets given their usually large call positions.
Charting the course
Right now $1000 is resistance long term, without some extraordinary volatility to the upside. Below is a three year, weekly chart of GLD. The bollinger bands are a great indication of potential support and resistance in price moves. We’re using a longer term chart to get a very broad view of GLD’s price action over the last 150 weeks.
Past performance
While past performance is no indication of future gains, GLD has outperformed the SPY (S&P 500) consistently for quite some time. Gold has always provided a safe haven for value. For thousands of years, gold has had the same purchasing power.
It is wise for investors with long term objectives to have some precious metals exposure in any portfolio as a hedge against inflation, which is expected to increase significantly in time. Traders may want to be more aggressive playing the rally depending on your strategy.
10Feb
Canadian dollar may rally
With the US poised to announce multiple government endorsed packages to stimulate the economy and assist banks, it is likely that a dramatic weakening of the US dollar will occur. The Canadian dollar seems especially well positioned to rally, perhaps even back to par with the US dollar.
We can see in the above chart a bottoming process in the Canadian dollar beginning to take shape. Now that oil is also potentially bottoming and some commodities are finding strength, the trend serves the commodity-driven Canadian dollar well. Watch the USDCAD pair and the FXC Canadian dollar ETF.